Answer question 20

Intermediate Finance-Exam 1 Q Search in Document Home Insert Design Layout References Mailings Review View Table Design Layout '+ Share Cambria 11 A AV AV A AaBbCcDdEe AaBbCcDdEe AaBbCcDc AaBbCcDdEE AaBbC AaBbCcDdEE Styles Paste BI U abe X2 X2 AL . A E Normal No Spacing Heading 1 Heading 2 Title Subtitle Pane x Office Update To keep up-to-date with security updates, fixes, and improvements, choose Check for Updates. Check for Updates 7 20. Bay Properties is considering starting a commercial real estate division. It has prepared the fol- +lowing four-year forecast of free cash flows for this division: Year 1 Year 2 Year 3 Year 4 Free Cash Flow -185,000 12,000 99,000 240,000 Assume cash flows after year 4 will grow at 3% per year, forever. If the cost of capital for this division is 14%, what is the value today of this division? (6 points) Page 8 of 9 8 of 1880 Words English (US) Focus + 160%